UBS plans algorithmic trading strategy for notes; Wachovia to price securities linked to Amex Gold Bugs

By LLuvia Mares

New York, Dec. 14 - UBS AG lead structured products news with plans for an offering of variable-coupon 100% principal-protection notes linked to UBS Short Term Rates Automated Strategy (Straus) index.

The underlying index reflects the performance of an algorithmic trading strategy designed to identify and exploit the behavior of short-term interest rates in five financial markets: the dollar, the euro, the British pound, the Japanese yen and the Swiss franc.

The interest rate will be based on the strategy reserve, a hypothetical cash reserve to collateralize a hypothetical 10-times leveraged investment of the principal amount in the index. Initially, 16.75% to 20.75% of the principal amount will be allocated to the strategy reserve, with the exact amount to be set at pricing.

The ending strategy reserve for each quarter will be the starting strategy reserve for that quarter plus par times 1,000% of the index gain for the quarter plus the strategy interest amount for the quarter, less an annual strategy fee of 1.5%. The strategy interest amount will accrue at Libor minus 25 basis points.

For each quarter, the interest rate will be amount by which the ending strategy reserve for that quarter outperforms the initial strategy reserve, subject to a minimum interest rate of 0%.

If the strategy reserve drops to less than 10% of the initial strategy reserve on any trading day during the life of the notes, no interest on the notes will accrue after that date.

The notes are due Feb. 20, 2013. The payout at maturity will be par the final strategy reserve. Investors will receive at least par.

The notes are expected to price on Jan. 24 and settle on Jan. 31.

UBS Financial Services Inc. and UBS Investment Bank are the underwriters.

Wachovia to price securities linked to Amex Gold

In other news, Eksportfinans ASA plans to price 0% enhanced growth securities due July 1, 2009 linked to the Amex Gold Bugs index via Wachovia Capital Markets, LLC, according to a 424B5 filing with the Securities and Exchange Commission.

If the final index level is greater than or equal to the initial level, the payout at maturity will be par of $10 plus double any index gain, subject to a maximum return of between 30% and 35%. The exact cap will be determined at pricing.

If the final index level is less than the initial level, the payout will be par minus the index decline if the index falls to or below the knock-in level, 85% of the initial level during the life of the notes or par if the index does not fall to or below the knock-in level.

The notes are expected to price and settle in December.

SG to price ReConvs

Contributing to what many market sources call a growing trend, SG Structured Products announced Friday it plans to price 13.2% ReConvs due March 28, 2008 linked to Newmont Mining Corp. common stock, according to a term sheet.

At maturity, investors will receive par unless Newmont Mining stock falls below the knock-in price - 80% of the initial share price - during the life of the notes and finishes below the initial share price, in which case the payout will be a number of Newmont Mining shares equal to par divided by the initial share price.

The notes will price on Dec. 21 and settle on Dec. 28.

Societe Generale is lead agent with Countrywide Securities Corp. as co-agent.

SG ReConvs linked to Merrill

In a similar deal, SG Structured Products plans to price 13% ReConvs due March 28, 2008 linked to Merrill Lynch & Co., Inc. common stock, according to a term sheet.

At maturity, investors will receive par unless Merrill Lynch stock falls below the knock-in price - 75% of the initial share price - during the life of the notes and finishes below the initial share price, in which case the payout will be a number of Merrill Lynch shares equal to par divided by the initial share price.

The notes will price on Dec. 21 and settle on Dec. 28.

Societe Generale is lead agent with Countrywide Securities Corp. as co-agent.

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